The Central Electricity Regulatory Commission (CERC) has denied Reliance Power compensation for additional costs incurred in mining coal in Madhya Pradesh for its Sasan ultra-mega power project (UMPP) due to a rise in bulk diesel prices.

The January 2013 decision of the government withdrawing subsidy on bulk diesel prices did not amount to 'change in law', the regulator said, denying relief to the firm. The company had claimed in its petition that a change in law in January 2013, which removed the subsidy granted to bulk consumers of diesel, forced Reliance Power to buy the fuel at market prices, thus increasing costs.

“The estimated impact, as on 1.3.2013, on account of the aforesaid change in law, will be approximately Rs 133 crore per annum for the approved peak coal production levels,” Reliance Power had said.

However, CERC said the bidders were fully aware of the legal regime on the pricing of diesel at the time of the submission of bids in July 2007. Also, it observed, the increase in diesel prices cannot be treated as an increase in the cost of business of selling electricity as the petitioner can use the mined coal, for other businesses, “independent of generation and sale of electricity”.

“The claim of the petitioner that the impact of change in law having occurred in respect of diesel used for mining coal during the operating period is wrong and the provisions of change in law contained in Article 13 of the PPA has no application,” the order said.